One way or another, Texas—and every other state—will be forced to make changes in Medicaid to reduce costs. The only question is how they will do it. The reform recommended here would ensure that the program’s participants have just as much incentive as the state to get the best and highest value use out of every available Medicaid dollar. With incentives properly aligned, and with more budgetary control provided to the state government, Texas would have the levers necessary to make adjustments over time to balance the needs of the program’s participants with the costs imposed on taxpayers.